6/13/2023 0 Comments Stock fill the gap![]() Some gap trading strategies work for a long period of time, then take a breather, before they resume working again. All trading strategies are static, while the market is dynamic, so the profitability varies. ![]() Gap trades can be both profitable and unprofitable, of course. Only your imagination prevents you from finding and labeling gaps. ![]() The above are the three most used labels for gaps, but there are, of course, many others. Ultimately, this might climax in an exhaustion gap. If a company releases an unexpected positive news bulletin, this might not only lead to a gap up but also an extended move up that lasts for several days. Opposite to exhaustion gaps, we have runaway gaps that happen when we have a sudden or sharp move from a base or consolidation. Buyers take control and the “vacuum” forces the buyers to pay more to tempt sellers to sell. Why does this happen? It happens because most of the sellers are gone (or finished selling) and the marginal amount of sellers dries up. However, the market had anticipated a weak report, and the price goes straight up from the open after it has gapped down. Typically, these happen after extended moves either up or down.įor example, a stock might have fallen many days in a row, and on day number x the company publishes an earnings report that is weak and gaps down substantially at the open. One group of gaps are often labeled “exhaustion gaps”. Most of the action in the market is just noise and randomness, and this obviously makes the overnight gaps random: they are “common”. This means that they happen frequently and have no or very little significance. Most of the overnight gaps are “common gaps”. In the stock market, almost all gains over the last 30 years have come from owning stocks from the close to the next open (please read more in the article linked above).
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